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RE: [amibroker] interpreting AA test results



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Thanks for your comments - it really has given me something to think about 
- and if I look at it in the way your outlined - there really is only one 
conclusion from a psychological viewpoint - you can't keep taking losing 
hits waiting for the winner.

>Arthur,
>
>Just a few points
>
>1.  The basic premise of your e-mail is that you can "cherry pick" or 
>selectively choose which trades to take from a given system.  The problem 
>with that is

No, my premise was not to cherry pick.

It's just that with intraday trading I can't physically manage to trade all 
the entry signals - so I trade them as they come along - and consequently 
will miss many while managing a trade, etc.

It's based more on random selection - while trading signals that come in 
HAVE to be ignored and then subsequent entry signals acted on.

But as indicated above - I have answered my own question wi5th our help - 
thanks

Arthur


>you will never know.  All the numbers listed below are based on taking ALL 
>trades.  As such, you can not base your decision to "cherry pick" based on 
>those numbers.  More to the point, you can't cherry pick system trades at 
>all and be a long-term, consistent winner IMHO.  Vegas Casinos are built 
>on the idea of playing a game (system) that they have an edge on (however 
>miniscule), and playing every hand.  That is what profit factor tells you 
>-- in the long run you should make X dollars for every dollar you lose.
>
>2.  That said, the tradeability of the systems must come into focus from a 
>psychological perspective.  If we look at the two systems - the high avg 
>win/avg loss, low avg trade system probably has a poor winning percentage, 
>but when it does win the winners are substantially large compared to the 
>losers.  The second system is the inverse in terms of winning 
>percentage.  Both end up with the same profit factor (more or less), but 
>get there by different means.  The question is can you take a system that 
>loses 60 - 70% of the time?  I can't.
>
>The headline is that you need to find a system that you can trade on every 
>trade from a capital and psychological perspective.  Just some things to 
>think about.
>
>Regards,
>Gary
>
>Arthur Sawilejskij <arthur@xxxxxxxxxxxxxxx> wrote:
>OK, assume I have some figures like:
>
>Ratio avg win/avg loss: 2.60 Avg. trade (win & loss): 0.29 Profit factor: 1.30
>
>and
>
>Ratio avg win/avg loss: 1.17 Avg. trade (win & loss): 0.51 Profit factor: 1.26
>
>Now, one of them generates 3 times as many trades and naturally has a
>higher dollar return. The problem is that  I can only physically trade a
>small proportion of the identified trades as I am intraday trading on
>margin and really only looking to compare entry strategy.
>
>I'm unsure in the circumstances how to determine which best suites my needs
>- but I'm inclined to think that as I can only physically trade a small
>proportion of the identified trades, I should be looking to trade the
>entries that give me the best average trade win - the second strategy.
>
>Dunno - would appreciate any thoughts from traders on selection of the
>strategy.
>
>Arthur


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